Reducing Rural Poverty in Lao PDR

Challenge

Lao PDR is now a lower-middle income country, and poverty has declined in recent years. However, impressive improvements at the national level have masked significant differences between regions and socioeconomic groups. Much of the population remains highly vulnerable to falling back into poverty. In response, the Lao 8^th National Socio-economic Development Plan calls for tailored interventions to improve the welfare of the poorest groups, particularly rural communities and ethnic groups.

Approach

The Poverty Reduction Fund was established to fight poverty at the grassroots level. It was designed to improve access to village infrastructure and services, and to empower villagers to manage their own project planning and implementation. The World Bank has been involved in the PRF since its inception and has helped to increase the scope of activities supported. PRF is now moving beyond access to basic services to address household capacity to escape poverty. This includes focusing on livelihood investments, access to markets, and production and consumption of diverse and nutritious foods, especially for pregnant women and young children. The current PRF III project is co-financed by the Swiss Agency for Development Cooperation.

Results

As of April 2019, the PRF III livelihood activities have achieved the following results:

• Between 2012 and present, 915 Self Help Groups have been established, with more than 10,000 members (85% female) in 165 villages. These groups provide loans to members to invest in income-generating activities such as chicken and pig raising, vegetable production, and handicrafts, and for emergency purposes. As of December 2018, approximately US$1.14 million has been loaned and 98% of Self Help Group members have borrowed.
• Monthly household income increased from 75,000 LAK (US$8.75) in 2012 to 450,000 LAK (US$52) in 2017, and 650,000 LAK (US$75) in early 2018. With increased livestock production, households reported higher levels of protein in their diet.

PRF III nutrition activities have achieved the following results:

• Out of 23 pilot Village Nutrition Centers (VNCs) established, 15 are still operating after financial support from PRF ended in 2016. On average, 15-20 women and their children are enrolled every year at each VNC. These VNC members are continuing to use products from the PRF-supported home gardens for cooking nutritious and more diverse meals.
• VNCs have been a platform for facilitating women’s empowerment. Women have become stronger advocates for themselves and their children, creating new norms and values around child feeding. Compared to children born before the VNCs were established in 2012, women observed faster child height and weight gains, and improved health, alertness, and learning capacity.
• There has been a 36% increase in the number of households with access to health services and a 45% increase in those with access to improved educational facilities during the first two years of PRF III (2017-2018).

The PRF infrastructure activities have achieved the following results:

• More than 1,200 subprojects were completed in the 43 poorest districts in the country, including schools, rural roads, water supply, irrigation, and others. 92% of complete projects were rated as being of high technical quality.
• 87% of households in target villages participated in votes on village priorities during village development planning. 90% of subprojects selected for implementation were those identified by women and 70% were identified by ethnic minorities.
• There has been a 48% increase in the number of households with access to all-weather roads during the first two years of PRF III (2017-2018).  

Bank Group Contribution

The International Development Association (IDA) of the World Bank provides US$30 million in financing to PRF. IDA also financed previous phases of PRF: PRF (2002-2011): US$19.34 million; PRF Additional Financing (2008): US$15 million; PRF II (2011-2016): US$25 million; and PRF II Additional Financing (2015): $US 11.6 million.

Partners

The Prime Ministerial decree establishing PRF allows it to receive funds from multiple sources. Following initial financing from the IDA, PRF started to attract financial support from other donors, including the Swiss Agency for Cooperation and Development (2008), Australian Aid (2011), and the Japan Social Development Fund (2011). This additional support allowed PRF to increase its geographical coverage. Currently, IDA’s US$30 million credit for PRF III is complemented by US$18 million from the Swiss Agency for Development Cooperation and US$6 million from the Lao government.

Moving Forward

Following the positive progress of PRF III, preparations are underway to scale-up livelihood and nutrition activities through additional financing, to cover 12 districts with high rates of stunting, which have been selected for targeted, multi-sectoral interventions of several upcoming and ongoing projects. PRF will complement projects in Social Protection, Water, Sanitation, and Hygiene, and Health. While still supporting rural infrastructure, PRF will shift toward investments that contribute to income generation (i.e., rehabilitation of roads to access markets, irrigation). Farmer Nutrition Groups – formerly Village Nutrition Centers – will focus on supporting children during their first 1,000 days of life.

Beneficiaries

Vanthong lives in Hua Phu village, in a remote part of Lao PDR’s northern Huaphan Province. He is part of the village implementation team that helped to build a bridge over a river to ease access, with PRF funding. “Before we had this bridge, our living conditions were very harsh....When it rained, we could not go to work, or go to the hospital if we were sick.”